Confectionery
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1 2008 Full Year Results 25 February 2009 2 Roger Carr Chairman 3 Agenda Chairman’s comments Roger Carr Highlights of 2008 Todd Stitzer Financial Review Ken Hanna Strategic Update and Outlook Todd Stitzer 4 Todd Stitzer Chief Executive Officer Highlights of 2008 5 Highlights Strong financial performance • Revenue growth of 7% • Underlying operating margins up 150 bps • Reported margin 11.9% • Pro-forma earnings per share up 16% Pure-play total confectionery business • Demerger of Americas Beverages completed • Conditional sale of Australia Beverages announced • Simplified category-led business model to strengthen in-market execution and growth opportunities Growth or change shown on a base business, 6 constant currency basis Implementation of Vision into Action has started well Governing Objective To Deliver Superior Shareowner Returns Vision Be the World’s BIGGEST and BEST Confectionery Company Performance •Organic •Total •Mid-teen •Strong •Efficient •Growth in Scorecard revenue growth confectionery trading margins dividend balance sheet ROIC of 4%-6% pa share gain by end 2011 growth Priorities 1. Growth: fewer, faster, 2. Efficiency: relentless 3. Capabilities: ensure world bigger, better focus on cost & efficiency class quality 1.1 Category focus for scale & 2.1 Reduce SG&A cost base 3.1 Embed Building simplicity 2.2 Reconfigure supply chain Commercial Capabilities 1.2 Drive advantaged, consumer 2.3 Rationalise portfolio 3.2 Invest in science, technology preferred brands & products & innovation 2.4 Divest non-core assets & 1.3 Accelerate ‘white space’ low-growth/high-cost 3.3 Deliver preferred products market entry via Smart businesses at competitive cost Variety 2.5 Optimise capital 3.4 Streamline processes 1.4 Create advantaged management 3.5 Improve talent, diversity & customer partnerships inclusiveness via total confectionery solutions 1.5 Expand platforms through acquisition 7 Our growth priorities in action Category focus for scale and simplicity South America • Multi-country category-led campaigns to launch improved products • Enhanced fruit flavour candies • Simultaneous ten country launch Halls revenue • Leveraging core Cadbury product up and consumer insights £12m Fewer, Faster, Bigger, Better 8 Our growth priorities in action Drive consumer preferred brands United Kingdom £25m • Re-launch of Wispa • Record launch with ~£25m sales in four months US & Canada • Building the Stride brand 7% protected market share v ‘5’ • In US, up 220 bps • US and Canada share over 7% Fewer, Faster, Bigger, Better 9 Our growth priorities in action Smart variety initiatives United Kingdom • Launch of Creme Egg Twisted • Record launch for Cadbury of a new product in the UK • Extensions to Cadbury Dairy Milk • Apricot Crumble • Cranberry & Granola Fewer, Faster, Bigger, Better 10 Our growth priorities in action Stronger route-to-market capabilities 81.9 Mexico 80 80 78.2 • Strengthened our position in traditional and modern trade 75 75 • Focus on in-store presence, improved sales networks and product availability 12.1 10 10 Results to date 6.9 • Gum share – now over 80% 5 5 • Mints – over 80% 1.4 3.0 0 0 • Strong growth in lollypops Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Cadbury Wrigley Ricolino Source: RIE Nielsen Result: strong commercial performance Revenue +7% 11% Chocolate +6% 11% Gum +10% Candy +6% Focus brands +8% 10% Focus markets +8% 14% Focus customers +8% 9% Emerging markets +12% 2007 market share +40 bps 12 Our efficiency priorities in action Sources of annual savings 100 Central costs, SG&A and outsourcing 50 Supply chain reconfiguration % of expected annual savings 0 2008 2009 2010 2011 13 Our efficiency priorities in action Reduce SG&A cost base Americas SG&A • Business unit rationalisation led efficiency drive • North America: three two • South America: two one • 15% headcount reduction in G&A across the Americas • Results • SG&A as % revenues improved by around 200 bps in 2008 • Revenues grew 10%, with South America up 18% Relentless focus on cost & efficiency 14 Our efficiency priorities in action Reconfigure our supply chain Supply chain reconfiguration projects include: • UK: Chocolate – programme to close Somerdale on track • First production from Poland • Poland: New gum factory online • Initiatives to leverage scale now underway • Australia & New Zealand: Chocolate and candy reconfiguration • Plan to rationalise SKUs and create ‘centres of excellence’ on track Modest benefits in 2009 with greater contributions from 2010 onwards Relentless focus on cost & efficiency 15 Our efficiency priorities in action Rationalise the portfolio • Priority for businesses with high complexity or low margins • Major restructuring of price and product SKUs in Egypt • Exited low-margin cocoa preparation down business in New Zealand 10% • Exited non-core businesses in B&I and Asia Pacific • Target of rationalising 5% of low margin Group revenues by 2011 Relentless focus on cost & efficiency 16 Our efficiency priorities in action Divest non-core assets • Conditional agreement to sell Gross consideration £550m Australia Beverages to Asahi for 1 £550m 2007 financials • Revenues £313m • Announced 24 December 2008 • EBITDA £33m • Completion expected in the second quarter of 2009 Multiples • Transformation of Cadbury into a • EV/EBITDA 15.2 times pure-play total confectionery • EV/Revenue 1.6 times company Benefit to Cadbury • Improves Group operating margin • Uplift to Group margin 30 bps by 30 bps Relentless focus on cost & efficiency 1. Revenues and EBITDA exclude the impact of 17 discontinued contracts Result: good progress toward our mid-teens margin goal • Reduced Central • Mix/Leverage • Reinvestment Costs • Portfolio • Cost Headwinds • Reduced SG&A rationalisation • Reduced Supply • Underperforming 2007 Chain markets 2011 18 Result: good progress toward our mid-teens margin goal • 180 bps contribution from Vision into Action • +190 bps from initiatives • +30 bps from portfolio 11.9% transformation 9.8% • - 40 bps from sustained investment in marketing • Minimal impact from pricing and input cost inflation • Year on year one offs broadly neutral • 30 bps from foreign exchange 2007 2008 2011 Before Re-presentation 19 Our capability priorities in action 2008 priorities • Embed Building Commercial Capabilities • Invest in science, technology and innovation • Deliver preferred products at competitive cost • Streamline processes • Improve talent, diversity and inclusiveness Results have been good • Commercial capabilities helped secure pricing • Strong pipeline of new products and technologies • Award winning marketing campaigns across our business 20 Our capability priorities in action Simplifying our organisation • Removed regional layer • Stronger category representation at senior levels • Elevate and empower business unit management • Accelerate implementation of local growth opportunities • Leverage category leadership and Cadbury’s commercial expertise Relentless focus on cost & efficiency 21 Result: transformed our business model and created a simplified category led organisation Simplified organisation • Reduced costs • Faster decision making Maximise impact • Improved in-market execution of categories Ensure world-class quality 22 Our sustainability priorities in action • Cadbury Cocoa Partnership • Securing the supply of quality cocoa • Improving the lives and livelihoods of farming communities • Purple Goes Green • Best in Class in the 2008 Carbon Disclosure Project • 17% reduction in water use since 2006 • Innovative seasonal packaging reductions • Be treatwise • 95% of products labelled with nutritional information • 55% of ‘treats’ include responsible consumption messages Performance driven, values led 23 Stars … • India • South Africa excellent growth • South America • UK – significant market share recovery and strong performance • US – delivered excellent performance despite competitor attempts to gain share … and a little disappointing • Russia – route-to-market changes missed expectations Strong year from the vast majority of Cadbury’s business 24 Strong delivery against our scorecard Performance target 2008 Achievement Annual organic revenue Up 7% Above our goal range growth of 4-6% 3 Incremental full year share Total confectionery share gain Up 40 bps gain compared to the last reported market share 3 Mid teens operating 11.9% 11.9% as reported, up 150 bps for continuing operations margin by 2011 up 150 bps using constant currencies 3 6% dividend growth, 55% Strong dividend growth Up 6% payout; above long-term target of 40-50% 3 Debt to EBITDA 2.1x and Efficient balance sheet expected to fall to 1.7x mid- 3 2009 3 Growth in return on invested capital Up 110 bps 110 bps improvement in ROIC 3 Committed to delivering our goals 25 Ken Hanna Chief Financial Officer Financial Review 26 Key messages • Delivered our financial commitments in 2008 • Revenue growth ahead of goal range • Fast start to margin progress in first full year of our Vision into Action business plan • Well positioned to make further progress in 2009 • Strong financial position and secure long-term financing • Price realisation in place to cover input cost increases Our Vision into Action business plan has driven significant performance improvement 27 Basis of preparation • Unless otherwise stated, all figures shown are for the continuing operations only i.e. excluding Australia Beverages and Americas Beverages • We are presenting our 2008 results on the basis of the four region structure • In 2009, we will be reporting on our seven business